Contract guarantees and payment guarantees support the performance of the contract

ON April 22, at the Gdańsk Remontowa Shiprepair Yard, an agreement was signed under which the shipyard received a guarantee limit of EUR 60 million from KUKE related to the performance of the contract for the construction of three Ro-Pax ferries. The units are being commissioned by Polskie Promy and from 2025 they will gradually service connections in the Baltic Sea. This is one of the largest orders placed at a Polish shipyard in the last 30 years.

Previously the Remontowa Shiprepair Yard obtained from KUKE performance guarantees for the proper performance of the contract, the beneficiary of which is the ordering party. The value of these guarantees amounts to EUR 48 million.

"The contract for the construction of Ro-Pax ferries is gaining momentum and we make it clear that KUKE's support is crucial here. Thanks to the performance guarantees, the contract has become final, and thanks to the payment guarantees obtained, we can count on financing from banks, which in turn is necessary for servicing contracts with suppliers and subcontractors. We have already secured the supply of energy systems and propulsion, and the project itself is being carried out according to the assumed schedule, which means that the first unit is to be delivered to the shipowner in 2025 ".

Michał Habina, President of the Gdańsk Remontowa Shiprepair Yard

"We are glad that we can participate in such an important undertaking, supporting this particular project of the Gdańsk Remontowa Shiprepair Yard and once again the Polish shipbuilding industry. Thanks to the use of solutions from the new export support system, we were able to jointly develop a transaction structure that ensures financing for each phase of construction of units, enabling safe and undisturbed performance of the contract. By assuming a significant part of the risk, we encourage domestic banks to open up more to financing the shipbuilding industry, which so far has been treated by them with great caution. We have excellent technologies, great professionals, the trust of Western shipowners and the potential to build more. However, the problem is to obtain appropriate financing in the form of guarantees and loans. May our new solutions and the Batory program change this situation for good".

Janusz Władyczak, CEO and President of KUKE

Ro-Pax low-emission ferries

Ro-Pax is a ferry that will be able to carry 400 people. The project includes: restaurant, bars, shop, playground for children and other amenities for passengers. The ferries will be low-emission, equipped with electrically controlled azimuth thrusters and bow thrusters, powered by LNG-powered generators operating in a hybrid system with battery support.

The units are to be 195.6 m long and 32.2 m wide. The length of the load line is 4.1 thousand. m and the maximum speed will be 19 knots. They will operate on the line between Świnoujście and Ystad, supporting the development of maritime transport.

Gdansk Remontowa Shiprepair Yard. is the largest company of the Polish shipbuilding group Remontowa Holding. It offers comprehensive technical solutions, the final products of which are fully equipped, modern ships. In addition to repairs and reconstructions, the Group has extensive experience in the design and construction of various vessels, including ferries, which were delivered, among others, by to Norway, Denmark, Estonia, Great Britain and Canada.

The project of building a new type of car-passenger ferries (Ro-Pax) is a strategic undertaking aimed at maintaining the market position and strengthening the competitiveness of Polish ferry operators, which is possible, among others, thanks to the solutions offered by KUKE.

At the end of 2018, KUKE provided insurance cover for receivables under the credit granted by DNB Bank ASA from Norway to its ferry operator. The contracts include the purchase of four passenger and car ferries from the Remontowa Shipbuilding S.A. shipyard in Gdansk, which will operate on routes between Norwegian ports. The total value of receivables insured by KUKE amount to over NOK 770 million, equivalent to approx. PLN 350 million. The insurance cover period for each ferry is 12 years.

The latest transaction shows that the instrument offered jointly by KUKE and BGK is a financially highly attractive option also for companies and their banks from Western Europe where interest rates have stayed at a record low. This is also an excellent example of how national institutions set up to support Polish exports do not limit themselves to handling transactions with emerging markets which are viewed as being more risky. Thus, we can see a growing interest in the use of this financing scheme by other Western European banks intending to lend money to their clients to buy goods or services from Polish companies, Piotr Maciaszek, Head of Medium- and Long-term Business at KUKE, explained.

This instrument, named the DOKE Programme, guarantees fixed interest rates on export credits with repayment terms of at least two years, granted to buyers by domestic or foreign banks. 

The system consists in a reciprocal settlement mechanism of interest rate differences, thus, subsidies and surpluses, between BGK and the bank granting the credit for the purchase of goods or services from a Polish supplier. In so doing, a commercial bank can offer its client a Commercial Interest Reference Rate (CIRR) and, at the same time, earn revenues calculated in accordance with a variable interest rate, e.g., LIBOR or EURIBOR, Anna Babiarz, Director of the Transaction Banking Department at BGK, added. 

CIRR rates have been very attractive over the last few months, for instance, CIRR for the period from 15 February to 14 March 2019 for credits denominated in euro was 0.46% for 5-year credits and 0.94% for credits with a term of over 8.5 years. Also, the opportunity for the borrower to secure a fixed interest rate for the entire credit period (e.g. for 12 years) is a beneficial stabilising factor for a foreign importer planning to purchase capital goods from a Polish exporter.

The support provided by the state offers Polish exporters the chance to compete on the global market under conditions similar to those that companies based in other OECD member countries benefit from. This allows them to expand their businesses to new markets and present a more attractive business offer. In order to be eligible for the DOKE Programme, export credits must be insured by KUKE.